Multiple Choice Quiz


1	Aside from what it says in the U.S. Constitution, the institution that is charged with setting U.S. monetary policy is called
		A)	The Bank of New York.
		B)	The Federal Bank.
		C)	The National Reserve.
		D)	The Federal Reserve.


2	A goal of monetary policy is to
		A)	enhance equity in incomes.
		B)	keep stock prices constantly rising.
		C)	help certain industries with exports.
		D)	dampen the business cycle.


3	Of the following which is always the largest
		A)	cash in the system
		B)	M1
		C)	M2
		D)	M3


4	If a bank takes in $1000 in deposits then the additional amount that it can loan out is
		A)	much more than $1000.
		B)	exactly $1000.
		C)	usually something like $900 to $950 depending on the reserve ratio.
		D)	usually something like $100 to $150 depending on the reserve ratio.


5	If the Federal Reserve wants to make very small adjustments and do so regularly it will
		A)	use open market operations.
		B)	institute a tax increase.
		C)	change an interest rate target.
		D)	change the reserve ratio.


6	If the Federal Reserve wants to make relatively large adjustments and do so a few times a year it will
		A)	use open market operations.
		B)	institute a tax increase.
		C)	change an interest rate target.
		D)	change the reserve ratio.


7	Which of the following would be a typical Federal Reserve action intended to slow an economy growing at an unsustainably high rate
		A)	a tax cut.
		B)	an increase in a key interest rate target.
		C)	a decrease in the reserve ratio.
		D)	a buying of government debt.


8	If the Federal Reserve wants banks to make more loans and it wants them to get the money through the Fed itself them they will lower the
		A)	discount rate.
		B)	Federal Funds rate.
		C)	Treasury Bill rate.
		D)	FRLR (Federal Reserve's Lending Rate).


9	It has been shown that when a country's central bank (the Federal Reserve is the U.S. central bank) is ________________ long-term economic growth is higher.
		A)	under the control of the executive branch
		B)	under the control of the legislative branch
		C)	under the control of the judicial branch
		D)	independent of political control


10	In 2001 the Federal Reserve attempted to minimize the effects of the recession by
		A)	cutting taxes 11 times.
		B)	increasing government spending 11 times.
		C)	raising the discount rate 11 times.
		D)	cutting its target for the federal funds rate 11 times.

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